Question

Fred decided on purchasing a $175,000 home. At closing he brought a check for $8390. The closing costs were as follows:

Title fee $545
Processing Fee $1900
Appraisal $695
Based on this information, how many points did Fred purchase?
A.3
B.1
C.0
D.2

Answer 1

A) 3

Step-by-step explanation:

Fred first had to cover the closing costs that added up to $3,140, which means that he had $5,250 to buy some mortgage points. Mortgage points are used to lower monthly mortgage payments. One point costs 1% of the total mortgage loan. So each point will cost Fred $1,750, therefore he will be able to purchase 3 points with $5,250 (= $5,250 / $1,750 = 3).